Sky Deutschland Narrows Loss, Says Earnings Improvement Will Accelerate

Sky Deutschland AG (SKYD), the German pay- television operator controlled by Rupert Murdoch’s News Corp., said it may end the year with enough customers to eventually become profitable.

Sky Deutschland expects to win another 200,000 customers this year after reaching 2.76 million subscribers at the end of the second quarter, the company said in a statement today. The TV company needs between 2.8 million and 3.2 million clients to achieve a profit before interest, tax, depreciation and amortization, Chief Executive Officer Brian Sullivan said on a conference call today.

Breaking even is “within sight,” he said, adding it depends on the number of subscribers in combination with the average revenue per subscriber. For 2011, Sky expects a loss of 145 million euros ($207 million) to 175 million euros at the level of Ebitda.

Sky Deutschland, 49.9 percent-owned by News Corp. (NWSA), faces competition from free TV channels in Germany. It has raised 400 million euros since Sullivan became CEO last year, investing in premium services and high-definition TV in a bid to win customers and stop subscribers from leaving.

Best Performer

Sky Deutschland is the best performer in the mid-cap MDAX this year, with a 47 percent gain. The stock rose 6 cents, or 2.5 percent, to 2.49 euros at 11:04 a.m. in Frankfurt, extending yesterday’s 11 percent surge.

The company’s second-quarter loss before interest, taxes, depreciation and amortization narrowed to 23.4 million euros compared with a loss of 47.4 million euros a year earlier, the Unterfoehring, Germany-based company said in a statement. That was better than the average 32 million-euro loss estimate of 11 analysts surveyed by Bloomberg.

The company’s guidance for new subscribers this year is “cautious and will be beaten,” said Sarah Simon, an analyst with Berenberg Bank in London. The results were “very solid.”

Second-quarter sales rose 17 percent to 276.7 million euros, the company said.

To contact the reporter on this story: Ragnhild Kjetland in Frankfurt at rkjetland@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net

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